Viacom Inc. and Blockbuster Entertainment have entered into advanced merger discussions in hopes of topping QVC Network Inc.'s bid for Paramount Communications Inc., knowledgeable sources said Thursday. The talks mark a dramatic escalation in the five-month takeover battle for Paramount, which reaches a crucial stage today when rival tender offers are set to expire.

Nasdaq Denies Report of SEC Questioning on QVC: Officials of the over-the-counter stock market and QVC Network Inc. downplayed the report that Securities and Exchange Commission regulators sought information about a halt in the trading of QVC's stock last week. The halt came shortly before the home shopping company and Paramount Communications Inc. announced their planned merger.

Paramount Communications Inc. on Wednesday recommended to its shareholders a merger with QVC Network Inc. instead of its once-favored suitor, Viacom Inc., after a court-ordered reassessment of the two bids. While Viacom could still return with a higher offer, company Chairman Sumner M. Redstone on Wednesday said the price had already reached "Never Never Land." Redstone would not comment on speculation that the company was in financing discussions about boosting its bid.

The board of Paramount Communications recessed Tuesday without taking any action on rival bids from Viacom Inc. and QVC Network, leading some to speculate that the board is giving Viacom time to raise the ante. Sources hinted that Viacom Chairman Sumner Redstone is in discussions over a financing deal that could materialize later this week. One scenario involves Blockbuster Entertainment Corp., the giant video retailer which is seeking a greater role in software production and distribution.

Ruth Glass is a self-described "shop-till-you-drop" consumer who usually buys lots of products from Home Shopping Network throughout the year--until the holiday season, when she depends on conventional retailers. But Glass, who hasn't dropped, shopped via Home Shopping Network this December, purchasing "Trilliant cut cubic zirconia" earrings designed by actress Suzanne Somers late last week as a Christmas gift for a friend.

Paramount Communications began considering rival bids for the company Monday under a blanket of secrecy that was broken almost immediately by QVC Network, which published its offer late in the evening. QVC raised the cash portion of its tender offer by $2 to $92 per share for 51% of Paramount. QVC said Paramount has informed the home shopping network that its bid topped the proposal made by Viacom Inc., but Wall Street sources said they expect at least one more round of bidding, if not more.

As the takeover battle for Paramount Communications Inc. approaches a final deadline, Viacom Inc. on Sunday responded to questions about purchases of its stock that have added controversy to its bid. In a written statement, Viacom Chairman Sumner M. Redstone said purchases of Viacom stock by National Amusements Inc., which he owns, were "totally lawful and appropriate." He also described as "totally inaccurate" assumptions that he controls WMS Industries Inc.

Paramount Communications Inc., moving closer to a deadline on auctioning itself, Friday unveiled steps designed to attract the highest possible bids. The New York-based entertainment conglomerate said it will not disclose the size of the offers it receives by Monday's initial bidding deadline. By keeping bidders in the dark, Paramount will reserve its power to continue negotiations with its two main suitors: QVC Network Inc. and Viacom Inc.